Liberal Democrat leader Nick Clegg delivering what was billed as 'a serious speech for serious times' to the party conference in Brighton. Photograph: Andy Rain/EPA

The day of atonement, what better day for Nick Clegg's big speech? He has shrunk his party's vote, shrivelled its membership and shed councillors like confetti. Some polls warn he may hardly have more than a people-carrier full of MPs after the next election. He need not warn his activists to expect "abuse and vitriol" for they already know they join "generations of Liberals marching towards the sound of gunfire." Numbly, his party seems to accept it for now – or the rump that hasn't already bolted. But few leaders survive so grim a prospect as they approach an election.

Remorse? Regret? Atonement? No: he did the right thing. No turning back, even as the economy plummets. Billed as "a serious speech for serious times", it takes delusional optimism for Clegg to claim "our journey" is "dealing with our debts and delivering growth", while every month the deficit soars, growth declines and demand is dead.

Saving the nation was why he yoked his party to Cameron: this speech reprised his scare-mongering Greek comparisons. Any relaxation of austerity risks the country going bust: with dark 1930s allusions he warned that "extremists thrive in tough times."

For now his party acquiesces, accessories to Osborne's catastrophic failure. With a bit of manipulation, he got them to vote against a Plan B, no change to Osborne's fiscal straitjacket. The mystery is why, when both parties equally fear an early election, Clegg still cleaves to Osborne orthodoxy when he could demand the Keynesian stimulus policies his party championed at the election – and Vince Cable murmurs sotto voce.

Boasting they are "anchored in the centre-ground", Clegg suffers the old delusion of the middle. "If you're attacked by Liam Fox on one side and Ed Balls from the other, you're in the right place," as if navigating by splitting the difference between flat and round earthers. "Our mettle has been tested" in making difficult and painful decisions. What he didn't say was whose mettle has been tested most – not Lib Dem politicians but all those whose benefits, services and jobs are cut by his "harsh realities of government", the bottom half most.

Naïve, vain or obtuse, he has been useful yellow camouflage for this most radical and ideological of Conservative governments. As if still beguiled by Cameron's affable rose garden manner, Clegg has colluded with the great Conservative blueprint for dismantling the state, outsourcing every service and withering welfare. He joked about Boris Johnson's gleeful claim this week that "Clegg is a natural Tory". But history's charge against him will be that after all these years of planning the politics of coalition, he failed to secure any of his party's key demands: no relaxation of fiscal austerity, no rescue of the NHS, more tuition fees but no electoral reform, no Lords reform, not even reform of party funding. No surprise reform went unmentioned.

Every Lib Dem leader tussles to say what their party is for, easy as the "party of protest" but far harder as the party of someone else's government. "Fairer taxes" is all they are left with, to be plugged from now until election day.

Clegg claims it as their badge of social justice, "the system as a whole tilted in favour of those on middle and low incomes." He simply ignores what the Institute for Fiscal Studies always said: this raising of personal allowances gives the bottom third nothing, the middle only a little, while the main gainers are the richest third: that's probably why Osborne gave it to him. Worse, universal credit will wipe out most of that little gain by the middle.

Yet again Clegg claimed social mobility is his mission, but when he ignores every projection that his government's policies will drive the social divide far wider, is he obtuse or dishonest?

Equality was never the Lib Dems' strong suit, shying away from what the state must always do to stop wealth flowing upwards to the few. But liberty is their USP.

This week they voted for assisted dying, the last great intrusion of the state on people's private decisions over life and death. They threw out secret courts. They rejected the Tories' latest deregulation of planning. On green energy Clegg pledged, "let the conservatives be in no doubt. We will hold them to their promises." We shall see, with a windmill-hating environment secretary.

"If you don't like me, vote Labour," Clegg told the Birmingham Post this week. After his contemptuous claim that "Labour plunged us into austerity'' and "let down the most vulnerable", few imagine any Lib-Lab coalition could ever include him.

• This article was amended on 27 September 2012 because the original said "he yolked his party to Cameron" and spelled straitjacket as straightjacket.

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